Investment Governance Meeting Summary – 1 March 2018

The Investment Advisory Committee (IAC) meet every quarter to review our Governed Range and funds.
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Strategic asset allocation

  • No SAA changes were recommended for the Governed Portfolios or GRIPs.

Tactical asset allocation

  • Last Change made on 8th February 2018.
  • RLAM have increased exposure to equities and commodities largely out of bonds and property.
  • We have deepened our underweight position within fixed income in favour of cash.

Fund review

  • 16 RLAM funds on watch
  • 5 funds under review
  • 17 Matrix funds on watch.

Governed Portfolios

Number of Governed Portfolios outperforming benchmark 1 year 8/9
3 years 7/9
5 years 9/9
Number of Governed Portfolios within target volatility ranges 9/9
  • Governed Portfolio 7 is minimally below benchmark over 1yr and Governed Portfolio 1 and 7 are below benchmark over three years.
  • All of the Governed Portfolios are outperforming over five years.
  • Only Governed Portfolios 4 and 7 are underperforming since launch.
  • Absolute returns remain very strong.

Governed Retirement Income Portfolios

Number of GRIPs outperforming benchmark 1 year 5/5
3 years 5/5
Since launch 5/5
Number of GRIPs within short-term risk measure 5/5
Number of GRIPS within long-term risk measure 5/5

All GRIPs were within the tolerances for their income and fund value risk metrics.

*For more information on the risk metrics please see leaflet“Managing Risk in GRIPs.”

Tactical strategy

 OverweightNeutralUnderweight
Equities    
Property    
Commodities    
High Yield    
Gilts    
Index Linked    
Corporate Bonds    
Absolute Return Strategies (including cash)    

  • TAA effects contributed positively over Q4; performance benefited from an overweight in Equities, funded out of Fixed Income and Cash. Both Commodities and Property were maintained around benchmark during the quarter.
  • Regional positioning within Equities benefited significantly from an overweight stance in Japan and EM, while being underweight the UK and US slightly detracted.
  • In Fixed income, the underweight position had a neutral impact on the portfolio; the position UK Gilts detracted slightly during the period, while being underweight UK index linked gilts was beneficial.

The following funds will be subject to action prior to the next IAC meeting:

  • RLP UK Core Plus (Schroder Core UK Equity)
    We have held two interviews with the investment team over the last 18 months and had taken comfort from a turnaround in short-term performance however the fund has dipped below benchmark again this quarter over 1, 3 and 5 years. We propose to close this fund and identify a suitable replacement.
  • RLP UK Core Plus (Schroder UK Equity)
    The fund is underperforming over the 1 and 3 years to the end of December 2017. This fund will be merged into the Core UK Equity replacement fund.
  • RLP Asia Pacific Core Plus (Stewart Investors Asia Pacific Leaders)
    The fund has underperformed over the 1, 3 and 5 year periods to the end of December 2017, with both sector allocation and stock selection contributing to this underperformance. Additionally, the funds elevated cash position (around 8% on average) in the past few years has been a clear headwind in a rising market. The high cash level is a function of the managers struggling to find attractively valued opportunities at this stage. Cash at the end of December 2017 stood at a more beneficial 4.7%. We will continue to monitor performance closely and seek an alternative solution if necessary.
  • RLP Emerging Markets Specialist (Stewart Investors Global Emerging Markets Leaders)
    Despite having a successful quarter, the fund continues to underperform over the 1 and 3 year periods to the end of December 2017. The fund’s quality growth style has been a major headwind as the value segments of the market have performed strongly, with stock selection also contributing to underperformance. The fund’s elevated cash weight has been a clear headwind in a rising market. High cash levels are a function of the managers struggling to find attractively valued opportunities at this stage. We will continue to monitor performance closely and seek an alternative solution if necessary.
  • RLP Japan Specialist (Invesco Perpetual Japan)
    The fund had a successful quarter, however still underperforms its benchmark over 1, 3 and 5 years. The fund is managed with a value / contrarian approach and this can lead to performance differing from the benchmark by significant margins – both on the upside and downside. We will monitor performance and seek an alternative solution if necessary.
Last updated: 26 Mar 2018

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.